Declining imports reflect 'dead' domestic demand

Sat, 08 Aug 2020

Declining imports reflect 'dead' domestic demand

News24
01 Aug 2020, 04:13 GMT+10

South Africa's trade surplus more than doubled in June, as a result of increasing exports reflecting increasing global demand. However, subdued domestic demand has seen imports decline.

The South African Revenue Service on Friday released trade statistics for June, which reflected a 10.1% lift in exports from the previous month. Imports declined by 18.9%.

"Export activity has picked up in line with the increase in global demand, however SA's export potential remains constrained by the still-dire global predicament, with the IMF forecasting a sharp 4.9% contraction in world GDP this year," said Investec economist Lara Hodes.

Exports could continue to recover, in the absence of a second wave of Covid-19 outbreaks and consequent lockdowns globally, Hodes said. But Hodes also warned that exports would be impacted by subdued global demand and supply side constraints.

As for imports, the restricted activity is a result of weak domestic consumption and investment demand, Hodes added. It could continue to be restrained by "muted demand" and if consumers' willingness and ability to spend is constrained.

Analyst Johann Biermann echoed this, taking to Twitter to described domestic demand as "dead".

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